Dealers should review their advertising immediately to ensure it includes all federally-mandated credit terms and disclosures. According to a news release from the Recreation Vehicle Dealers Assocation (RVDA), the Federal Trade Commission (FTC) has stated it plans to more vigorously prosecute deceptive dealership advertising this year while it reviews what, if any, additional regulations are needed.
Greater FTC scrutiny of dealership marketing and F&I practices was the trade-off for exempting dealers from oversight by the Consumer Financial Protection Bureau.
The Truth in Lending Act (TILA) and its implementing regulation, called Regulation Z, require that certain information be disclosed to consumers so they can compare credit offerings and shop for the best terms. Previously, advertisers could distort the true cost of the credit by publicizing only the most attractive credit or lease terms in order to get customers into the dealership.
For example, an RV advertisement might have read, “1968 fifth wheel–only $75 per month.” But the consumer couldn’t determine whether it was a good deal without knowing the down payment, number of payments, annual percentage rate and whether the transaction was a credit sale or a lease. TILA requires that advertisements tell the whole story.
If an advertisement contains certain trigger terms, it must also include certain additional information. Regulation Z trigger terms are:
• The amount or percentage of a down payment (i.e., “10% down,” “ $1,000 down,” “90% financing,” “trade-in with $1,000 appraised value required”).
• The amount or percentage of any payment (i.e., “monthly payments less than $250 on all our loan plans,” “pay $23.44 per $1,000 amount borrowed,” “$210.95 per month”).
• The number of payments.
• The period of repayment (i.e., “up to four years to pay,” “48 months to pay”).
• The amount of any finance charge (i.e., “financing costs less than $300 per year,” “less than $1,200 interest”).
If any of those trigger terms are used in an RV sales ad, then all of the following disclosures must appear clearly and conspicuously near the trigger term:
• The amount or percentage of the down payment.
• The terms of repayment (i.e., the number amount and timing of payments).
• The annual percentage rate, which may be abbreviated as “APR” (Dealers also must disclose if an APR can be increased after the credit transaction is complete).
The type of transaction you advertise — closed-end credit, open-end credit, or a consumer lease — determines whether a term is a triggering term and, if so, what disclosures are required. There are similar requirements for advertising an RV lease under Regulation M; however, RVs are infrequently leased to consumers.
For more information, contact Brett Richardson at Info@RVDA.org.